When it comes to creating a trust to protect assets against various predatory efforts including financial elderly abuse, lawsuits, and undue influence, certain attractive trust features can be utilized. These features allow the person who establishes the trust to receive income as well as realize various other advantages. Remember, trusts have various purposes and not all features are a suitable fit for every trust. This article, however, discusses some of the most common asset protection features that are utilized in New York trusts.
# 1 – The Ability to Change Beneficiaries
Fortunately, it’s often possible to make a trust irrevocable while still keeping the ability to change beneficiaries who receive assets under the trust. Being titled irrevocable can often make a trust seem final, but if you can decide who receives trust assets and to what degree, there’s still some freedom to the terms of a trust. A “power of appointment” can be utilized during which a grantor reserves the right to change beneficiaries through an amendment to that individual’s last will and testament. Consequently, it’s possible for a person to both realize the features of asset protection of a trust while still being able to change some features of how assets are distributed.
# 2 – Distributions During Your Lifetime
Trusts often permit a trustee to pass on assets from the trust to beneficiaries during the life of the trust’s creator. This aspect allows the trust creator’s loved ones to access the principal funds in the trust. This can prove if necessary if this amount is necessary to pay for care or emergency expenses. While the trust creator often cannot withdraw assets in the trust, beneficiaries are almost always not prohibited from using funds they receive from the asset to help the grantor.
# 3 – Income Receipt Rights
A person who wants to establish a trust to protect assets often relies on dividends, interest, or other income generated by the investment of these assets. Fortunately, it’s also possible to protect this secondary income. Despite its irrevocable nature, a trust can still provide income to the grantor. Additionally, grantor trusts also provide several tax advantages. For one, the trust creator can report income on a Form 1040 without having to file separate federal tax forms.
# 4 – Placing Limit on Trust Distributions
When assigning power to distribute money from a trust, it’s critical to make sure that power is not abused. The best way to overcome these limitations is to place safeguards on the power of the party who makes distributions from the trust or trustee. One commonly utilized protection is to require a trustee to receive permission from another entity that functions as a trust protector. After all, a trustee who makes improper or unwise distributions could end up defeating the purpose of the trust.
Speak with an Experienced Elder Law Attorney
Trusts are one of the most nuanced aspects of elder law, and an experienced attorney can help you achieve your goals. Contact Ettinger Law Firm today to schedule a free case evaluation.